Do You Have More Than 50 Employees? Understanding Obamacare's Employer Mandate

Soon, businesses that employ 50 or more full-time-equivalent (FTE) workers will have to offer insurance coverage or face a tax penalty, called the "employer shared responsibility payment." This law, known as Obamacare's "employer mandate" will take effect in 2015 or 2016, depending on the size of the business.

Employers with 100 or more full-time employees will have to offer coverage to at least 70% of eligible workers in 2015. That number jumps to 95% in 2016. Employers who employ 50 to 99 full-time workers do not have to comply with the law until 2016.

The employer mandate will apply to your business if even one of your employees would qualify for cost-saving health insurance subsidies through HealthCare.gov, the health insurance marketplace for New Hampshire.

For example, say you employ 105 full-time workers and don't offer a qualifying health plan. If just one of those workers can buy an individual health insurance plan at HealthCare.gov and qualify for reduced premiums with Obamacare's tax credit, you'll have to pay a penalty -- and it could be a hefty one.

On the other hand, if you offer coverage to your employees that is considered affordable and meets the legal requirements for coverage, your employees wouldn't be able to save money by purchasing an individual plan in the marketplace, so you won’t have to pay the penalty.

What Does "Full-Time Equivalent" Mean?

As mentioned above, you are subject to the employer mandate if you employ 50 or more full-time-equivalent workers.

Under the Affordable Care Act (Obamacare), a full-time employee is defined as one who works an average of 30 hours per week, or at least 130 hours per month. Your business's number of full-time-equivalent employees is determined by adding together the hours of full- and part-time employees. For instance, if you have four employees who work 15 hours per week, that equals two full-time employees.

The calculation is made this way, in part, to stop employers from cutting workers' hours to avoid the need to provide insurance or pay the penalty.

What Is Affordable Coverage?

Under Obamacare, coverage is considered affordable if it costs no more than 9.5% of your employee's household income. (This calculation is based on modified gross adjusted income.) Of course it isn't possible for you to determine this exact figure for each employee. As a rough guide, you can assume that your business offers affordable coverage if each employee's monthly contribution to employee-only health insurance doesn’t exceed 9.5% of the wages reported on their W-2 form.

Does Your Plan Cover Enough?

The health plan you offer to employees meets minimum value if it pays for at least 60% of covered services.

The U.S. Department of Health and Human Services provides a minimum value calculator to help you determine whether a plan covers 60% of costs. To use this calculator, you'll supply information like copays and deductibles to come up with the final value. But be forewarned: The calculator is a complex Microsoft Excel spreadsheet. Look for the "User Guide" tab before you get started.

If you need more help, consult a qualified insurance agent or broker.

How Much Is the Tax Penalty for Employers?

The employer shared responsibility payment will primarily depend on whether or not you offer any health coverage at all.

If you don’t offer health coverage, the annual penalty is $2,000 per full-time employee, excluding the first 30 employees.

If you do offer coverage, but it doesn’t meet the requirements described above, the annual penalty is $3,000 for each full-time employee who qualifies for reduced premiums under Obamacare. (To learn more about who qualifies for cost-saving subsidies, see Ways to Save Money on Obamacare in New Hampshire.)

To find out what you may have to pay, the U.S. Chamber of Commerce offers an Employer Mandate Calculator. You can use it to estimate what your penalty could be under the new law, based on your number of full-time employees.